NAFTA sided with the company because the environmental rules in that city were higher than the standard set by NAFTA.
The city refused to allowed the project because of that matter and the multinational suited them.
Geez! I don't have the link anymore of the specific example I am talking about but, as soon as I get it back, I'll tell you.
Meanwhile, if you do a search with the words suit/sue mexico multinational NAFTA, you will find several cases like this one.
----------------------------------------------------------------------------
Metalclad
This case involves a claim by U.S.-based Metalclad, a waste-disposal company, that the Mexican state of San Luis Potosi breached Chapter 11 of NAFTA in refusing permission for a waste disposal facility.
The governor deemed the plant an environmental hazard to surrounding communities, and ordered it closed down on the basis of a geological audit performed by environmental impact analysts at the University of San Luis Potosi. The study had found that the facility is located on an alluvial stream and therefore would contaminate the local water supply. Eventually, the governor declared the site part of a 600,000 acre ecological zone.
Metalclad sought compensation of some $90 million for expropriation and for violations of national treatment, most favored nation treatment and prohibitions on performance requirements. This figure is larger than the combined annual income of every family in the county where Metalclad's facility is located.
In August 2000, a tribunal found that Mexico had breached the Investment chapter and awarded Metalclad $16.7 million, the amount it had spent in the matter. In this case, Metalclad proceeded to begin construction of the facility without having local approvals, claiming that it had assurances from the Mexican federal government. The case raises important questions about whether governments retain the authority to enact environmental controls on foreign investors and about the powers of local governments.
The Mexican government has appealed the award to the Supreme Court of British Columbia, since hearings of the case were held in British Columbia, and the Canadian government and government of Quebec have intervened.
http://www.essential.org/monitor/mm2001/01april/corp1.html